Bird's-eye view of economy provides strong, steady picture

My opinion is based more on my observations and personal experiences than economic reports. With historic knowledge of my home area and a bird’s-eye overview at the regional level, I think I’ve got a finger on the economic pulse. Here is my economic forecast for southwest Missouri.

The U.S. economy is in its 50th consecutive month of expansion – an all-time record. In spite of what the talking heads are saying on the evening news, investors – and particularly off-shore investors – are voting with their checkbooks. Investment in hotels and commercial properties is robust. Our economy is seen as a stable and safe economy offering returns apparently not available in Europe or the Pacific Rim. Money that had previously been invested in the subprime mortgage market by European banks and their subsidiaries is looking for new opportunities. Our economy, for all its faults, is the best game in town.

The farm sector economy finally is on the upswing and hopes are high that crop and land prices will continue to rise, according the Federal Reserve Bank of Kansas City’s Main Street Economist rural and regional report. The multiplier effect of increased farm income finding its way to town to retire debt, be invested in equipment or devoted to capital improvements should give this area a boost that may not be seen in other regions.

The subprime mortgage collapse that has investors on the coasts wringing their hands is less of an issue in the middle of the country.

Compared to residential real estate value drops of 3 percent to 4 percent in some areas of the nation, the Midwest has seen a drop of less than 1 percent with extended market exposure times. The bottom line is that Midwestern homebuyers are less impacted than la-la land buyers who were essentially speculating in housing futures.

Southwest Missouri is poised to continue leading economic expansion in the region that includes northwest Arkansas, southeast Kansas and, to a lesser extent, northeast Oklahoma.

With an employment base firmly grounded in health care, education and government – six of the top seven Springfield metro area employers are in these segments – this region is less susceptible to economic expansion and contraction than areas relying on manufacturing or technology for job creation.

The phenomenal growth in the Springfield-Branson-U.S.Highway 65 corridor appears to be sustainable as Branson continues to re-invent itself as a community of well-heeled permanent residents who value the area’s recreational, health care and retail amenities as much or more than the traditional entertainment attractions.

Granted, I am at odds with the Federal Reserve’s Eighth District latest Beige Book report released Nov. 29, which predicts a slowdown in almost every sector. While the Fed’s territory does include Springfield and the surrounding area, it also includes states stretching further toward Canada and Mexico.

Uncertainties in economic forecasts born of high oil prices and subprime mortgage jitters have led some lenders to tighten commercial credit requirements. SBA district offices have reported that their numbers of loans are fairly flat this year but that the dollar amount of loans is up sharply. This is an indication that lenders are looking to enhance their comfort level on larger deals by availing themselves of the SBA guarantee.

As capital previously funding the subprime mortgage market seeks a new home, commercial lending may benefit with increased availability and lower cost.

Also, because only the nonguaranteed portion of an SBA loan counts against a bank’s lending capacity, more capital is freed up for small-business creation and expansion.

One characteristic that distinguishes commercial lending in general and SBA lending in particular in the Springfield and southwest Missouri markets is that lenders are typically community banks focused on generating economic growth, development and job creation in their home communities.

Contrast that with banks using government-guaranteed loans as profit centers via sale of their portfolio in the secondary market. Our lenders are investors in the communities they serve. The lenders’ confidence in those communities is reflected in steady growth of small-business lending. That confidence is not easily shaken by events that give Wall Street heartburn.

Given the number of construction cranes, orange traffic cones and commuting patterns disrupted by the next retail or health care project, we would expect the Springfield SBA branch office to guarantee more than $100 million in credit to as many as 500 small businesses in fiscal 2008.

With that investment, we would expect to retain 3,500 jobs in the 28 counties served from that office.

Sam Jones is the Region VII SBA Administrator, serving Missouri, Kansas, Iowa and Nebraska.